Interactive Brokers Review Part 2.
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Following on from an earlier post, I wanted to do a more in depth review of Interactive Brokers. As I mentioned here I have been extremely happy with them since making the switch from TD Ameritrade. You should seriously consider switching to them, read on to find out why.
Interactive Brokers, or IB as they are commonly known, were one of the early players in the electronic trading sphere. They currently offer trading capabilities on just about any market with a very technically advanced trading platform known as the Trader Workstation. So far, I have only used the platform to trade stocks and options, so that will be the focus of this article.
Let’s take a look at some of the pros and cons of Interactive Brokers and review some of the features available on their platforms.
* The most obvious benefit of IB that springs to my mind is the commissions. IB have really low commissions on stock and option trades. You’ll be looking at around $1 per contract for options.
* As mentioned above, their trading platforms are very advanced, so you are able to easily enter complex option spread trades as one order.
* The reporting is amazing, and goes in to great detail (sometimes almost too much), in terms of your account, trade history, fees, commissions and profit and loss.
* Security is another great benefit of using IB, as each account has the option to add a security token in order to greatly decrease financial fraud or your account getting hacked into.
* One thing that most impressed me about IB, was the ease in which you can open an account. I have had some pretty bad experiences with other brokers in the past with opening or transferring account, but with IB it was a breeze. Once I transferred my account from E-trade to TD Ameritrade and the process was an absolute nightmare that took over 2 months, during which time my positions were frozen and I couldn’t close any of them out. With IB the process took about 1 week and the other great thing is that I did it 100% online. All the forms can be filled in online and even signed by typing in your name. This was amazing as i really hate filling in pages and pages of documents which is usually what it takes. They are also one of the few brokers that allow residents of the Cayman Islands to open an account. Probably not that relevant for most people reading this, but yay for me!!
* There are a number of regular free webinars. There are a multitude of recorded webinars and each month there are around 6-7 live webinars. I’m sure I don’t know half of the things I could be doing on the system. There is also a trader’s university so you can educate yourself in trading new asset classes or instruments.
* Most mainstream brokers such as TD Ameritrade, Scottrade, E-Trade and Charles Schwab are focused mainly on the US markets, whereas with Interactive Brokers you can trade global markets. With IB you can trade stocks, options, forex, bonds, futures, commodities, warrants, structured products and mutual funds from the one account. In total there are over 90 global markets you can trade.
* IB also provide excellent research for those traders looking to get involved in the commodity markets.
* Given that IB’s platform is fairly advanced and geared more towards professionals, it can perhaps be a bit daunting and confusing for a lot of retail investors. Thankfully, as mentioned above there are a lot of free tutorials and live webinars.
* From my experience their customer service has left a little bit to be desired. They do have a live chat support system, but occasionally it can take 5-10 minutes for someone to join your chat and even then they may not be able to answer your question. I have had a couple of instances such as this where I waited for an extended period of time, only to be transferred to another chat room as the customer service agent didn’t know the answer. When he moved me to the other room, the chat froze and I had to close it down. This has happened to me 2-3 times. I guess this is the compromise you make for a low commission structure.
* For non-IRA accounts, the minimum deposit to open an account is $10,000. This may prove to be restrictive for some people especially those just starting out.
* IB’s charting package, while sufficient, does not have the class and sophistication of other packages. It has all the bells and whistles you need, but it is just not quite as slick as the charting packages offered on other platforms such as Think or Swim. However, one great feature of the chart package is that you can place trades and set stop loss levels directly on the chart screen with 2 mouse clicks. It’s really easy and allows you to get in and out of trades super quick, which is great if you are looking at doing some day trading.
* As another compromise for the low fee structure, there tend to be a lot of other expenses that are charged by IB. These can be things such as order cancellation fees, but they do also charge for certain types of market data and news services.
* This isn’t a huge issue, but sometimes the Trader Workstation, which is a Java application, can take a little while to load.
This is the main trading platform at Interactive Brokers, although they also have a slightly easier to use WebTrader platform. You are able to place virtually every type of order through their software and their system is excellent at tracking trades in your portfolio. The main feature of the Trader Workstation is speed. The platform was designed for quick placement of trades with programmable “hot keys” and one-click order entries. You are also able to trade stocks, futures and options from the same platform.
Value for money – 5 Stars.
Platform usability – 4 Stars.
Platform functionality – 5 Stars.
Customer Service – 3 Stars.
Overall – 4.5 Stars.
If you’re a moderately experience trader, I think you will love Interactive Brokers. Beginners may find it a little difficult, but given the amount of Webinars and the detailed help section on the website, you should be able to get the hang of it fairly quickly. There is a lot of functionality that is not available on many of the mainstream brokers and the commissions structure is probably the best you will find. Overall, I highly recommend them.
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12 Comments.
Wow, great info, very detailed. I had not heard of Interactive Brokers before. I’m currently with E-Trade, how easy is the process of moving over existing holdings? Would I have to sell all my positions?
I don’t use CHAT with them but I have called them a good many times and always found them to be very helpful and polite.
Thank Pat. I haven’t called them often, maybe I will have to try that next time.
I don’t use CHAT with them but I have talked with them many times and they were always very good and polite. l.
If you trade option spreads there are no cancellation fees. Ie an Iron Condor would not be subject to a cancellation fee. If you trade single strikes then you will be charged to modify/cancel your order.
I actually found the commission to be on the high side, especially when you are taking liquidity. I would use optionshouse or eoptions if you want to save on commissions.
I’m new to IB and their commissions are very confusing. I tried a narrow butterfly trade on SPX with total of 40 contracts. I’m supposed to receive USD500 in credit but my account change show only USD50 credit. Which means the fees comes to usd450??
That commission seems much too high so there must be something else going on. Can you send me a screenshot of the trade log? [ protected]
Also, what was the bid / ask spread? Did you enter it as a limit or market order?
I’ve verified Interactive Option broker terms of trading. All my withdrawal requests cancelled by broker.
Stay away from that crap company !
Their chart package is quite simple… but the commissions are low.
I’m confused about their cancellation and modification fee. Does it apply to options? How much are they? I can’t seem to find info specific to options.
I don’t think they charge any, but I could be misunderstanding what you’re asking.
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Option Strategy Lab.
Enter your price or volatility forecasts for an underlying and the Option Strategy Lab will return a list of single and complex option strategies that will potentially profit based on the forecast.
To open the Option Strategy Lab.
From within Mosaic, use the New Window drop-down and select Option Analysis and then Option Strategy Lab . From within Classic TWS, use the Trading Tools menu and select Option Strategy Lab .
When you first open the Option Strategy Lab, the Strategy Scanner opens to allow you to enter your forecast data.
To populate the Option Strategy Lab.
1. In the Strategy Scanner, enter the underlying.
2. Define your forecast, including:
The range, between now and a selected last trading day. Price or Volatility as the forecast driver. The predicted action of the price or volatility. Choose from: Drop Rise Be rangebound Move at least The increment and unit (choose from value or percentage)
3. If desired, filter your results by Premium, Delta, Strike or Last Trading Day. You can select multiple filters and define multiple values within each filter.
4. Click Done to populate the lab.
Order Entry.
The strategy selected in the scanner populates the Order Entry panel. Each time you select a new strategy the Order Entry panel is repopulated.
Modify order parameters in the Order Entry section at the bottom of the panel, and click Submit to trade the strategy. Before you submit the order, you can analyze the forecast-based strategy using the charts and graphs.
Analyze Strategies in the Scanner.
Based on your forecast, the scanner returns a list of options or complex option strategies that will potentially be profitable if your forecast is correct. Some fields in the scanner include:
Sharpe Ratio - the measure of excess return (the risk premium) per unit of deviation for the strategy.
Return/Risk Ratio - the ratio of the max potential gain to the max potential loss.
Probability of Profit - the market implied probability of any gain.
Maximum Potential Gain.
Maximum Potential Gain as a Percentage of your Investment.
Maximum Potential Loss.
Maximum Potential Loss as a Percentage of your Investment.
Break Even Point - the underlying price(s) required for a strategy to break even.
Hold your mouse over a value in any field to see the definition. Add more fields by clicking the Configure wrench icon and then selecting Configure Columns .
Analyze the Price Target.
The Price Target chart shows the current underlying price highlighted in yellow, and the target price based on your forecast in red.
The blue shaded area represents the estimated price range to one standard deviation. Drag the dotted line to change the expiration date.
Compare Strategy Performance.
Each strategy checked in the scanner is represented in the comparison chart.
By default the chart is set to today's date, but you can choose the last trading day you specified in your forecast or any date between today and the last trading day.
Strategy Detail.
The Performance Details charts provide a close-up look at the option or strategy selected in the scanner. Use the selector to change the comparison category.
The last trading day is driven by the date in your forecast, and can be changed by changing the date in the Performance Comparison, or by dragging the date line in the Price Target chart.
Interactive Brokers Platform Walkthrough.
Interactive Brokers (IB) comes from a long tradition of open outcry pit trading. It has brought this tradition to its comprehensive, standalone trading platform built for the active, sophisticated trader. IB offers low commissions, best price execution, super low margin rates, and access to thousands of global instruments to invest in – from stocks, bonds, currencies, and commodities to simple and complex derivatives strategies using options and futures. U. S.-based traders can also access and trade international markets without having to fund their accounts in multiple currencies.
Homepage - Interactive Brokers (IB) is designed for the sophisticated trader looking to harness the full power of global markets and nontraditional assets. IB's proprietary software provides innovative charting tools and ultra-fast, low-cost execution.
Interactive Brokers Demo Page - Unlike many other online brokerage platforms, Interactive Brokers relies on a standalone application that runs on your computer instead of through its web site. Click the Download Demo button to download and install the software. You can run it as a free demo or sign up and use it to trade for real.
Login - After you've downloaded and installed the Interactive Brokers software, you'll be asked for your login credentials. If you have an account, enter your username and password and click Login . If you are new to Interactive Brokers or just want to take it for a spin, click Try the Demo on the top right corner. The software is compatible with eight international languages, including English, German, Chinese, and Japanese.
Trading Platform.
Front Page Mosaic - Once you've logged in, you'll see the front page Mosaic. This dashboard displays a quick-order entry panel on the left and a monitor of selected tickers and market news on the right. On the bottom of the panel you'll see an activity log that summarizes your open and completed orders. As you might be able to tell, Interactive Brokers is geared toward active traders who don't want a lot of hand holding. To return to this screen at any time, simply click on the Mosaic tab at the bottom left of any page.
Browse Layouts - IB's Mosaic dashboard is completely customizable – you can rearrange windows, add or remove boxes, and more. There are a number of pre-configured layouts that you can pick from – under the File menu at the top of the window, choose Open Layout Library, and you will be able to select the layout that works best for you. You can also save your own custom layouts for later use.
Account Overview - If you want to see your account balances, positions, and funds available for trading, click on the Account menu at the very top of the window and choose Account Window. The Account menu is also where you go to change your profile settings, fund your account, transfer in or out, or view and download statements and reports, including tax forms.
Dropdown Menu - Interactive Brokers has quite a lot of functionality. You can trade U. S. and international stocks and bonds, foreign currencies, options, and other derivatives. If you click the blue New Window button on the top left of the dashboard, it will produce an extensive dropdown menu to navigate to various parts of the platform.
Cheat Sheets: Order Entry - For each window in the IB system, clicking on the question-mark icon will load up a cheat sheet to help you use the features and functions in that part of the system. For example, opening the cheat sheet for the Order Entry box brings up this annotated tutorial.
Order Entry Settings - Interactive Brokers is a highly customizable platform. You can change how the Order Entry box looks and behaves, add or remove buttons and shortcuts, program hot keys, and much more. Click on the small wrench icon at the top right of the Order Entry box to load the settings manager. In fact, nearly every box within the Mosaic dashboard is customizable to some degree using the appropriate wrench icon. Advanced traders may want to consider the Rapid Transmit setting, where orders can be placed immediately, simply by clicking on Buy or Sell . Many platforms require multiple clicks to place a trade. But by using this setting, combined with suppressing the confirmation box, you can create true one-click trading from your workstation.
Classic: Trader Workstation & Mosaic - If you don't care for the customizable layout of the Mosaic dashboard and its dropdown menu, IB lets you choose an alternate format. Click the Classic TWS tab at the bottom of the dashboard window to switch to a Classic Trader Workstation. The top horizontal menu bar now lists quick links to popular screens, and the main window displays a monitor of real-time price quotes.
Classic: Orders - To place an order in the Classic TWS, click on the Order icon on the top left of the menu bar. This will open the classic order window. Simply enter the asset symbol, quantity, and order type, and you're ready to trade.
Classic: Account - Click the Account button on the menu bar for a snapshot of your account balances and status.
Trading Stocks & Funds.
Buy & Sell From the Mosaic - You can buy and sell stock and other assets directly from the front page. On the top left corner is the Order Entry box. Input or look up the ticker symbol you're interested in and you'll be asked if you want to trade stocks, options, or other investment products attached to that symbol. To trade stocks, choose Stock from the dropdown. Then choose Buy or Sell and enter the quantity of shares. You can choose from a customizable dropdown menu of standard quantity sizes (for example, 100, 200, or 500) or enter your own quantity. Choose your order type and then click Submit. You can generate this Order Entry window at any time from the dropdown menu by choosing the first option, Order Entry. In addition, if you right-click on quotes or monitors, you can quickly buy and sell the item you've selected.
Mosaic: Advanced Options - If you click on the small Advanced button in the Order Entry box, you can include some additional directions with your order. For example, you can route your order to a specific exchange or use a routing algorithm such as the SMART router to send your order to the best location for the best execution. You can also have Interactive Brokers hide the size of your order; execute large orders in smaller, discrete chunks; or add an automatic hedging order. If you want to see the market depth and liquidity for a stock, choose the Market Depth (Level II) option from the dropdown menu.
Mosaic: Order Confirmation - After you've submitted your order, you'll get a confirmation screen with an overview of the order details and funding requirements. If everything is correct, confirm the order. Otherwise, cancel it and fix any mistakes. For active traders who don't want to spend extra time on a confirmation screen, you can eliminate this step by clicking the check box on the lower left that says Don't Display This Message Again to activate one-click trading.
Mosaic: Activity Window & Orders - You can see all of your orders in real time in the Activity window, found on the lower left of the default layout of the Mosaic workstation. Open orders can be modified or canceled before they are filled. Click on the Trades tab for a history of executed trades or the Summary tab for another way to visualize your trading activity.
Trading Derivatives.
Options Chain - If you're interested in buying or selling options or just want to see some quotes, click on the Option Chain button on the top right of the Order Entry box. This will give you a new window with quotes for near-the-money calls and puts for the stock ticker that was loaded. To enter an order to buy or sell an option, click on it to load it up into the Order Entry box on the main screen.
Options Chain: Strategy Builder - If you're planning to trade more sophisticated options strategies, such as spreads and combinations, choose the Strategy Builder link from the dropdown menu. This will open an options chain linked to a window where you can construct various complex options strategies by adding individual legs (parts of a spread). You can customize your spread by changing the relative volume of each leg (for example if you wanted to do a 1x2 ratio spread). Click Submit Order to enter the whole strategy as a package to buy or sell.
Options Chain: Complex Orders and Trades Scanner - Once you've entered a complex options order, it will appear in the Complex Order Book (COB). You can view the COB by selecting the Complex Orders and Trades Scanner, which you'll find in the dropdown menu under the Technical Analysis heading. Here you will also be able to browse and trade any other options spread on the order book. The spread description is spelled out, along with the size of the order and the bid/ask for the strategy. Hover over a particular spread to get more information about it. Clicking on a spread will populate the Order Entry box with that order for you to trade.
Buy & Sell FX Matrix - Users of Interactive Brokers can trade more than just stocks. If you want to trade foreign exchange (FX) markets, select the FX Matrix option in the dropdown menu under the Quotes heading. Once you click on that, a new window will pop up with a matrix of real-time quotes in the top six global currencies (USD, GBP, JPY, CHF, CAD, and EUR). You can add additional currencies to the matrix by clicking on the wrench icon for settings. You can trade any of these currency pairs by clicking on one of them. That will populate the Order Entry box in the Mosaic dashboard.
Tracking Investments.
Monitor: Portfolio - To view your investment portfolio and a snapshot of its relative performance, click on Portfolio from the dropdown menu. Here you can see the daily profit and loss for your portfolio, as well as the individual holdings in your account.
Monitor: Menu of Options - The monitor window is also a springboard for a ton of functionality. Right-click on a ticker to bring up a menu full of options – including trading tools, analytics, charting, and more.
Monitor: Performance Details - Click on the Profile button at the top of the window to open the Portfolio Performance Profile window. This screen will show you some sophisticated performance and risk metrics, including the calculated value-at-risk (VAR) for your portfolio, and predict your portfolio's performance given simulated scenarios – for example, what would happen if the S&P 500 index moved by +/- 10%. You can bring up this screen at any time from the dropdown menu by using the Portfolio Performance Profile link under the Technical Analysis heading.
Portfolio Builder - Interactive Brokers has some really powerful tools for building custom portfolios that follow the strategy of your choice. Click on Portfolio Builder from the dropdown menu to get started. With the Portfolio Builder, you can backtest your strategies, create portfolio alerts and notifications, and manage multiple strategies all in one place.
Create New Strategy - Click on the + Create New Strategy button at the top of the window to start building your portfolio. You can choose from among pre-loaded strategies or create your own. Simulated historical performance is displayed on the top left, with a sector breakdown on the top right. Below this is a detailed list and summary of the components of the proposed portfolio. Like the strategy? Click on the green Invest button on the top to execute the strategy based on the dollar amount that you want to dedicate to it. Click on Edit Rules to change the strategy at any point. Other buttons let you Divest from the strategy or Rebalance your portfolio to the original strategy weights with one easy click from this window.
Alerts - Alerts are useful for monitoring prices and market activity while you're focused on other things. Open an Alerts window from the dropdown menu to set up alerts based on price changes, time of day, volume spikes, and more. Build in complex logic to your alerts and even have them activate trades when triggered. The Preview will let you know exactly what the alert is programmed to do. When alerts are triggered you'll be notified on your workstation – and also by or push alert to your mobile device.
IBot - One really cool feature is the IBot chat bot – it's still in beta but well worth trying out. Click IBot from the dropdown menu to load the chat window. Here you can enter text (or speak using a microphone), and IBot will interpret your query and return the appropriate results. You can ask for quotes, see charts, place orders, and more from IBot. Type "help" at any time in the chat box to get a list of common commands and more.
News & Market Insights.
Event Calendars - There are numerous corporate and government events each day in the U. S. and around the world. Here you'll find when companies are scheduled to report earnings or go ex-dividend, or when the next federal unemployment report will be released, for example. You can view the whole range of events – or filter them by region or by stocks relevant to your portfolio – by clicking on the Event Calendar button at the top of the Mosaic dashboard.
News - Interactive Brokers offers access to a variety of corporate and economic news and headlines. Click the News button at the top of the Mosaic dashboard, or find the News link on the dropdown menu under the IB Information Systems heading. Go here to select news tailored to your portfolio or strategy, select which feeds you'd like to subscribe to, or simply view top headlines or trending stories. Headlines also update in real time and appear on the lower right corner of the Mosaic dashboard. Filter or screen news items by ticker, asset class, region, or other keyword. In addition to feeds by news outlets, you also have access to social media mentions such as Twitter via an integrated StockTwits feed.
Bloomberg TV - If you'd like to view real-time financial news, you'll have live access to the Bloomberg TV feed (both audio and video). Find Bloomberg TV under the News options in the dropdown menu.
IB Daily Lineup - For a digest of the day's market news, corporate actions, economic events, and more, all in one handy place, go to the IB Daily Lineup link in the dropdown menu under IB Information Systems.
Market Signals - If you're a market technician, you can get a summary of emerging Market Signals based on spikes in volume, price moves, or patterns that are setting up. Click on a signal headline to load that ticker into the Order Entry box.
Analyst Research - While Interactive Brokers does not provide its own in-house research, it does offer access to a number of useful research feeds. Click on the Analyst Research button at the top of the Mosaic dashboard or find this link in the dropdown menu. If you want to see a digest of recent analyst upgrades and downgrades, select Analyst Action. You can also view research provided by Zacks, Altavista, Briefing, Slingshot, and Reuters.
Trading Tools.
Charts - Are you more of a visual learner? IB's charting tools are a powerful way to visualize market prices and trends. These charts are fully customizable and can be saved for later reference. You can also trade directly from the charts, using the Buy and Sell buttons on the top right corner of the chart window, or set an Alert. You can open a chart from the dropdown menu or by right-clicking in the market Monitor.
Charts: Studies & Settings - You can add an overlay on your charts from dozens of studies, indicators, trend measures, and more. Right-click on a chart and choose Studies, or find the Studies link from the Edit menu in the window. You can also use this box to change chart parameters to fit your preferences.
Quote: Market Depth - Level-II quotes with market depth and liquidity from across all subscribed exchanges are accessible via the dropdown menu. This information is useful in seeing how likely an order is to be filled at a good price and in a reasonable amount of time. Click on a price to populate the Order Entry window.
Time and Sales - You can also get a trade-by-trade history of the market activity for a particular ticker symbol. Choose Time and Sales from the dropdown menu to see exactly what has traded and when.
Toolbox - For a quick reference to many of the most frequently used tools – quotes, options chains, fundamentals, news, charts, etc. – open a Toolbox from the dropdown menu. This will create a separate window with these functions at your fingertips.
Researching Investments.
Analysis: Fundamental & Technical - If you like to get under the hood of your investments, IB has some nice analytic tools for you. In the dropdown menu, there is a heading called Technical Analysis. The first option is Fundamental Analysis. Here you have access to all sorts of stock analytics, including financial ratios, analyst ratings and forecasts, and more. Click on the Financial Statements link to bring up the current and historical income statement, balance sheet, and cash flow statement for the company you're interested in.
Analysis: Analyst Forecasts - Do you have an idea about what the price of a stock should be? Why not compare your judgment to what the professionals think? Click on the Analyst Forecasts link under the Fundamental Analysis sub-menu to bring up a slew of consensus estimates and trends for everything from share price to dividends, book value, and future cash flows.
Analysis: Stock/ETF Benchmarker - One neat tool to check out is the Stock & ETF Benchmarker, found under the Technical Analysis heading of the dropdown menu. Here you can compare your investment portfolio strategy against a number of benchmarks to see how you're performing and to analyze more closely which is the appropriate benchmark for your investments.
Analysis: Advanced Market Scanner - If you want to search for individual stocks, bonds, or other asset classes in the U. S. and abroad, find your way to the Advanced Market Scanner under the Technical Analysis heading of the dropdown menu. Here you can screen and filter investments based on a host of criteria and search functions.
Analysis: Mutual Fund/ETF Replicator - Another neat tool is the Mutual Fund/ETF Replicator, found under the Technical Analysis heading of the dropdown menu. This tool lets you search for the ETF that best matches an existing mutual fund. You can enter the mutual fund symbol or search for the one you are interested in. Then the replicator gets to work, telling you which ETF or combination of ETFs comes closest to that mutual fund. This is a useful feature if you like the low-cost and stock-like attributes of ETFs.
Analysis: Options Analysis - If you're interested in trading options, IB has some very good analytic tools. Under the Technical Analysis heading of the dropdown menu, find Option Analysis. From there, choose the Probability Lab. This tool will help you develop options strategies based on how you judge a particular stock's odds of success. You can then trade these strategies in the market.
Advanced Trading: ScaleTrader - ScaleTrader is an automated trading algorithm that you can customize to buy dips or sell rallies. This tool scales your total order so that it fills at progressively better prices in a trending market. This can translate into better fills and be more effective than setting a series of stop loss orders.
Advanced Trading: Baskets - For more advanced traders, IB has a sub-section of its dropdown menu called Advanced Trading Tools. One handy tool here is the Basket Trading screen, where you can create groups of stocks to be bought or sold all at once as packages.
Advanced Trading: Risk Navigator - For advanced traders who want to know more about their risk exposures, the Risk Navigator tool lets you analyze your potential downside in real time, with tools like value-at-risk (VAR). The Risk Navigator also has a What-If portfolio feature for playing out the impact of hypothetical scenarios on your P&L.
Advanced Trading: More Advanced Tools - There are many other advanced trading tools and features for sophisticated investors that are beyond the scope of this walkthrough. Click on More Advanced Tools to see what else IB has to offer.
Customer Support.
Client Services - If you need help with anything related to your IB account or the software platform, you'll find the Help menu at the top of the dashboard window. Click on Customer Service/Customer Service Info for ways to get in touch with support staff by phone, , or live chat. You can also view quick tips and FAQs here.
Interactive Brokers Review.
While Interactive Brokers comes with a $10,000 minimum funding and is not suitable for casual investors, it leads the industry in international trading and low-cost commissions desired by professional traders.
By Blain Reinkensmeyer / February 21st, 2017 / Updated: December 12th, 2017.
Review Sections:
Founded nearly 40 years ago, Interactive Brokers (IBKR) is known for its industry-leading commissions schedule, margin rates, and support for international trading.
By presenting one universal portal through which clients can trade on more than 100 market centers in 24 different countries, and deal in stocks, options, ETFs, futures, forex, bonds, and CFDs, Interactive Brokers has something to offer any seasoned trader who has at least $10,000 ($100,000 for margin accounts).
Commissions & Fees.
With its core clientele being professional traders and institutions, providing the lowest commissions schedule available is critical for Interactive Brokers. In our rigorous assessment, they deliver without question.
First, it is important to note that Interactive Brokers does not accept payment for order flow, a key element in providing quality order execution. In our assessment of order execution for the 2017 Review, the broker came second behind Fidelity. For more, see our guide to order execution.
Overall, Interactive Brokers unquestionably reigns supreme in the category of commissions and fees.
Interactive Brokers also leads the industry with the lowest margin rates, which vary from 1.91% down to a staggering 1.41% for clients who hold more than $1 million with the brokerage.
Speaking of equity trades, rates start at $.005 per share with the fixed-rate structure ($1 minimum). Alternatively, the tiered-rate structure, which starts at $.0035 per share, can be used, but routing is factored in, which can add or reduce the cost, depending on whether the client is removing or adding liquidity. Some math will reveal that for small order sizes, i. e., several hundred shares, Interactive Brokers is a fantastic deal. Trade several thousand shares or more though, and Interactive Brokers quickly becomes pricey.
Options are $.70 per contract with no minimums, and active options traders will enjoy the fact that exercise and assignments are practically free. Like tiered equity trades, per contract fees tier down as total shares traded increases.
New and casual investors should be aware of the miscellaneous fees and minimums charged by Interactive Brokers. Put simply, spend at least $30 in commissions each month and you are in the clear; otherwise, charges for inactivity can reach up to $20 per month. While far lower than the minimum spend required at say Lightspeed, it is still something to keep in mind. A full breakdown can be found on the Commissions & Fees notes further down the page.
Overall, Interactive Brokers unquestionably reigns supreme in the category of commissions and fees.
Platforms & Tools.
The flagship platform Interactive Brokers offers is its Trader Workstation (TWS). The platform is set up to trade everything under the sun, including global assets, and is designed to be used by traders with ample market experience. The default experience is called Mosaic, while clients also have access to view what is called Classic TWS (the original version of the platform).
Because Interactive Brokers supports so many asset classes, it had to rethink its position and watch list management. What they came up with, which takes some getting used to, is extremely efficient. Type in any stock symbol and you will see a summary of available securities. Watch lists can include anything from equities to individual options contracts, futures, forex, warrants, you name it. I preferred the Mosaic view, although I know many long-term clients prefer the Classic view.
Watch lists can have up to 338 different columns, and to say they are fully customizable is truly an understatement. No broker offers an experience like TWS. Beyond learning how to effectively build watch lists, I found only one usability disadvantage that comes from supporting so many investment types, and that is pulling up quotes or trading securities. Even typing in AAPL for Apple yields a slew of possible matches, which can be overwhelming for non-professionals.
Turning to charting, technical traders will find nearly everything they need. One hundred and twenty four different studies are available to be added to any chart, and customizations cover every possible option. Note though, while 124 option indicators are impressive, TWS still trails the 270 and 370 offered by TradeStation and TD Ameritrade thinkorswim, respectively. Out of all the tools on TWS, I found the charts to have the most user-friendly interface.
Considering the depth of functionality, I was surprised to find only eight tools for mark ups. While the basics are present – trendlines, notes, zooming, Fibonacci, etc. – important tools such as support and resistance lines, channels, and the like are missing. Pickiness aside, the charts on TWS have all the core functionality required to succeed: viewing historical trades, alerts, trading off charts, comparisons, and index overlays, to name several.
There is no question TWS is built for professional trading as there are, for example, a staggering 63 different order types available for clients to use, by far the most in the industry.
Alongside charts, TWS is also home to a variety of other tools not covered in this review. Algo trading, Options Strategy Lab, Volatility Lab, Risk Navigator, Market Scanner, Strategy Builder, and Portfolio Builder, to name a few, are all available within TWS. There is no question TWS is built for professional trading as there are, for example, a staggering 63 different order types available for clients to use, by far the most in the industry.
After assessing TWS across 58 individual variables, the platform easily ranked among the best in the industry. Certain tools, such as charting, lack depth compared to those the top-ranked platforms use; however, overall, TWS delivers.
Lastly, for clients traveling without access to their desktops, or for clients looking to simply monitor their portfolio, place trades, and view watch lists, IB WebTrader is a good solution. After loading WebTrader, I found a detailed summary of my portfolio balances and margin requirements alongside a full spectrum order ticket. When I say full spectrum, I mean trading for all asset classes is supported. The only limitations are algo orders and other advanced order types.
Pulling quotes will provide only a basic high-level summary, an extremely rudimentary chart I recommend be avoided altogether, and an option chain. Basic stock screening is also present alongside a high-level international market summary tab, Market Pulse. Customizations are essentially non-existent throughout, although streaming real-time quotes are found throughout, which is essential.
Bottom line, the focus of WebTrader is to monitor portfolios and manage orders; it is not designed to be used as a standalone. It accomplishes these functions well.
Being a professional trader-focused brokerage, Interactive Brokers is not known for its research offering. Bundled with the platform clients will find what they need to conduct mostly thorough research for stocks, decent research for ETFs, and little to no research for Mutual Funds.
That said, Interactive Brokers does offer a variety of third-party provider feeds a la carte, including Morningstar, which are available for a monthly fee.
Mobile Trading.
Mobile trading with Interactive Brokers is mostly an enjoyable experience. All devices are supported including iPhone, iPad, Apple Watch, Android smartphone, and Android tablets.
When testing the iPhone app, I found the app had everything I needed to trade effectively.
When testing the iPhone app, I found the app had everything I needed to trade effectively. From lightning quick streaming data to full-featured order entry and portfolio management, all the main criteria were quickly checked off.
The drawbacks with the experience center around usability. For example, the charts have 68 different optional studies, which is great, but the charts are not flexible. If you set the settings to view a daily chart of the past six months, that’s the only view you will get until you adjust the settings; there is no panning. Also, two-factor login with Touch ID is supported, but you have-to use a secondary IB Key app instead of simply Touch ID logging into the actual app as you load it.
Other drawbacks include a lack of stock and/or index comparisons in charting, no customizable home screen, no streaming live TV or videos on demand, no Level II quotes, and only being able to set basic stock alerts without push notifications support. You also cannot perform ACH account transfers within the app.
Cons aside, I found the app had a handful of nice features not often found across the industry, including custom screening /scanning and after-hours charting.
As stated previously, mobile trading with Interactive Brokers is well supported across all devices and has the core functionality required by traders to go about their business and trade effectively.
Other Notes.
One notable weak spot in Interactive Brokers’ offering is its customer service. During testing for our 2017 Review, we found support to be consistently poor regardless of the channel being used: phone, , live chat. The broker placed 15th out of 16 brokers we tested.
While Interactive Brokers does not cover advisor services and institutional asset management, the company is unique in that it offers what it calls the Investor’s Marketplace. The tagline of the service is to “Find the right service provider for your trading needs.” For example, I presented myself as “an individual investor seeking an advisor” and a list of several hundred advisors popped up. Hedge funds, research and technology providers, administrative service providers, and the like are all included.
Final Thoughts.
With industry-leading commission rates, more than 50 different order types, staggering low margin rates, support for every investment imaginable, trading in more than 100 international markets, and a robust trade platform suitable for any professional, Interactive Brokers is a great choice for investors who fit into its target mold.
Methodology.
For our 2017 Stock Broker Review we assessed, rated, and ranked sixteen different online brokers over a period of six months. In total, we conducted 349 customer service tests, collected 5,277 data points, and produced over 40,000 words of research. How we test.
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